What works and what doesn’t work in technical analysis, every form. This is a list of TA that can be seen in my own analysis—only the most consistent and optimal. I’ve been studying technical analysis for 11 years, and I’ve tried just about every form, tested and tweaked them. I blend “what works” in with my own Elliott wave analysis to narrow the odds to
as close as “zero” turn to Bigcharts.com, a I’ve been using day I learned You’ll see moving stochastic and
bonacci or Elliott wave software. They’re robotic, only human eyes can ac- curately read Elliott wave correctly. You’re wasting thousands of dollars if you listen to their “lies”. They claim a lot of “stuff”, without real actual re- sults. I HAVE real actual results to back my claims, anyway, here are forms of TA that I’ve studied, and how reliable they are as indicators..
as possible, or to Bigcharts.com.
free service, is what since the very first technical analysis. averages, RSI, slow more.
no need for fancy Fi-
This is a biggie for me every expiration week, typically the Wednesday
before the week of ex- a reversal of the re-
is when I start to ana- For example for the look at how many calls puts are about to ex- Say QQQQ is trading there’s 10 puts for
piration there’s cent trend, this lyze max pain. QQQQ’s, I’d vs. how many pire that week. at 42, and
every 5 calls go-
ing up to 43, 44, and 45, there’s a good chance of a sizeable rally in expira- tion week, however, if there’s for example 10 calls for every 5 puts that are going to expire that week, going from 40, 41, 42 QQQQ, there might be a
week. This in- works 70%- time, and can able.
Arms Index – (TRIN):
slump that dicator
80% of the be very reli-
The TRIN is calculated: Arms Index = (# of advancing issues/# of de- clining issues)/ (Total up volume/Total down volume). A value of less than
1 is bullish, of more than 1, bearish. This is a very unreliable random indi- cator that has a 40-50% success rate. Avoid using this.
Extreme readings can be note able however but… this is more of a longer-term reading. Not 100% reliable.
Bollinger Bands – Basically, it involves a stock or index reaching ex- tremes if they touch the top or bottom band. Can be effective at times, but a stock or index can ride either band for an uncomfortably long time (60% accurate). To visualize the bands, go to Bigcharts.com and use set- ting “Bollinger Bands.” I’ve seen people really screw up with this analysis big time, so AVOID.
This is excellent for finding extremes, at the tops or bottoms of the market. Comparing historical readings (like 1998 NASDAQ bottom, year 2000 top) can provide eerily accurate results.
Essentially, tops are found when there are a noticeable excess of news- letters writers that are bullish, and bottoms when the bears are in excess. Excess can be 65% bears, 25% bulls, 10% neutral, or vice versa. Just com- pare the bull bear ratios for every top and bottoms since the 70’s in the long-term charts that can be found at Bigcharts.com (custom setting), and you’ll notice how reliable it is. It’s a very powerful indicator.
consistent, are the morning star
(bullish) (bearish): gulfer , and hanging
Can have reliability during periods of high vola- tility. The only forma-
tions I see that are three black crows:
bullish and bearish en- man (bearish).
The most powerful rever-
sal patterns that I’ve seen that’s worked in the past few years since 2009 are the morning star, evening star and rare gravestone doji. Morning star bottoms have been VERY frequent since 2009, and the eve- ning star followed by island reversal is equally as frequent…I’ve actually seen them work, along with my 5th wave bottom calls as much as 8 out of 10 times in the past few years.
I hate to say it, but a watered down version of Elliott Wave. However, the Dow theory influenced R.N. Elliott.
Update 2013: The transports in 2012 confirmed the bull market move with an explosive upward 3…search stockcharts.com for $TRAN. This is a DOW theory confirmation pattern.
structure of the pyramids date 2013: Have yet to this stuff!
MACD – during peri-
MACD that “crosses
positive, to visualize go to bigcharts.com and use the setting “MACD”) af- ter a turnaround in stock or index, can be a strong confirmation. How- ever, during low volatility, accuracy is 60%. A crossover is when the
MACD crosses positive (over 0). Bigcharts.com and “MACD.” Update again, and it failed and over…AVOID.
from negative to To see it, go to use the setting 2013: I tried it miserably over
(secret = ( )..involves (simple. Fibonacci!) Up- make heads or tails of
ods of high volatility, a over” (from negative to
Typically bull markets rise above the 50 and 200 day MA. When the two cross (intersect on the chart), it can signal a major turn in an index or stock. It’s bearish when a stock remains below either moving average for an extended period. Stocks can find major support at the 50-day MA as it rises. You’ll notice this “phenomenon” consistently. A drop below the 50 day
MA, for a sus- can signal a rever- trend, or vice versa.
Put Call ratio:
The most power-
moving average of the overall p/c ratio. a 21 day that’s .80 or higher (pref- erably .90-1.00) can signal a major bottom. This one measurement is one big key in my bottom calls. All other P/C measurements I’ve found to be far less effective.
Relative Strength Index
This is another one of my favorites that have proven to help guide my Elliott Wave Analysis. It’s simple. When gauging a bottom, look at the 3-5 year chart of an index or stock, and look at how low the RSI has went dur- ing each major low. If the current RSI reading is near or below a major
tained period sal of an up-
ful P/C Ratio I’ve found to be is the 21- day
low reading, it can signal a major bottom. It’s a consistent indicator. In- versely, it can signal a major top. Again, very effective.
Slow and Fast Stochastic
Fast is unreliable, at least to me, because it’s too “noisy.” A slow sto- chastic that mirrors previous lows in an index, or at 0-20, can signal a ma- jor bottom. Inversely, readings of 80-100 can warn of a major top in a stock or index. Combined with RSI bottom readings, it can magnify “bot- tom calling” frequency.
During periods of huge volatility and elasticity, channeling can be ex- tremely effective. I typically draw the channel from the way bottom of a wave, to the top. If it breaks, it can signal a W2 or a corrective wave. But during less volatile markets, the technique is far less effective.
The VIX has been, in the past 3-4 years, a somewhat inconsistent indi- cator after the high periods of volatility in 2000-2001. In 2001, the VIX reached the highs of the crash of 1998, (in the mid to upper 40’s, VIX) and that was one indicator I used in Sept 2001.
However, volatility has been extremely low in the past 3-4 years, and an indicator of 15-17 has “been enough” to qualify as extreme bearishness. Is that a sign? Just recently from the October 2007 top, the VIX has reached the mid 30’s again after years of being in the upper teens MAX, but typical readings that signal bottoms are in the 40’s and higher.
Update 2013: The new VIX readings that signal tops and bottoms are this: VIX under 12 = sell and VIX over 21-23 = buy. These are the new bull market readings, and since I believe we’re in a brand new exponen- tial 3rd wave pattern long term, these two numbers will be very reliable for many years to come..